Supplier Assessment and Development​

SUPPLIER PERFORMANCE ASSESSMENT

The supplier performance assessment contemplates the comprehensive management of sustainability (ESG) in the execution of contracts; therefore, it seeks to measure the compliance with the Environmental, Social and Governance management commitments, acquired by the supplier for the contract execution Ecopetrol.

This assessment is based on 5 indicators distributed in each ESG dimension: 

•  ENVIRONMENTAL MANAGEMENT: 

Measure the compliance of the “HSE Aspect” criterion to monitor and reduce the potential negative impact on people, the environment, and facilities during the execution of contracts.

• SOCIAL MANAGEMENT: 

Measure the compliance of:

• Labor and Commercial Aspects Criterion: Monitor and measure compliance with legal and contractual obligations of a commercial, labor, or social security nature. It also contemplates the inclusive labor employment or local employment.
• Milieu Management Criterion: Monitor and measure incidents, complaints and claims that affect the milieu and that are attributable to the supplier. Likewise, it measures the level of compliance with the commitment acquired by the supplier for the local contracting of goods and services and the activities for value generation.

• GOVERNANCE MANAGEMENT: 

Measure the compliance of:

• Operational efficiency criterion: Monitor and measure the efficiency of the contracted service and compliance with the value promise in economic, technical, object and scope of the contract and/or supply strategy.
• Contract terms: Evaluate compliance with the agreed work plan and the monitoring and control of the delivery of administrative documents, which contemplates the supplier qualification in the Supplier Information System, complying with the legal, financial, commercial, HSE and ethics and compliance requirements.
   

SUPPLIER VERIFICATION AND QUALIFICATION

The supplier verification process evaluates the suppliers ´minimum requirements fulfillment for the company’s approval in Ecopetrol’ s Suppliers Information System. The requirements that suppliers must meet are determined by the following variables:

• HSE certifications: The requirement for HSE certifications is carried out in accordance with the characteristics of each contract, considering the risk level analysis, the place of execution and the criticality of the activities. 
• Economic impact: Determines the obligation to present financial information
• Goods and services classification in the Kraljic matrix: Indicates the commercial information requirements.
• Categories with specific requirements: Commercial activities that by their nature require the endorsement of national or international institutions.
• Ethics and compliance requirements: These are transversal to all suppliers, therefore, they must fill out the asset laundering, financing of terrorism and commitment to integrity forms and, as mentioned above, the suppliers, and its related parties, are consulted in restrictive and control lists. 

THIRD PARTY ASSESSMENT

Certain goods and services needed by Ecopetrol require an external evaluation and certification to be invited, verified, and establish a commercial relation. Therefore, they must carry out the assessment through a third party and present it to Ecopetrol in a current state and guarantee its update, otherwise the supplier will not be able to participate in the selection methods.

The type of certification the supplier must have, is determined according to its economic activity. These accreditations are detailed below:
 

SECOND PARTY ASSESSMENT

To guarantee the correct execution of the contractual relations, Ecopetrol has generated an Integral Ecosystem of Risk Management Measures and Contracts Execution Verification Mechanisms:

COMPLIANCE WITH NATIONAL AND INTERNATIONAL STANDARDS AND SUPPLY CHAIN MANAGEMENT BEST PRACTICES

Ecopetrol’ s Supply Chain is a national and international benchmark due to its remarkable management, therefore, it continually challenges its performance to incorporate the best market practices and accomplish national and international standards, both in its operation and in its suppliers’ performance. The decisions and strategies made for the Process Evolution have taken into account the recommendations and assessments carried out by international consultants, such as Boston Consulting Group, Kearney and Mckinsey, which have allowed the identification of the Process´ maturity level, including suppliers´ management.

According to these assessments, Ecopetrol have been recognized with a high level of performance, being classified within the top quartile of the industry in the "Aspirant" category in the Kearney Assessment of Excellence in Procurement (AEP) measurement and the consultancy for strengthening of suppliers screening carried out by Boston Consulting Group, which have been successfully implemented. 

In 2023, the supplier screening and assessment methodologies and its results were audited by EY with a positive result regarding the practices implemented by Ecopetrol.
 

“ON-SITE” OR DESK VERIFICATIONS

Assessments on demand, carried out in a corrective or preventive manner to the process and the regulations of suppliers´ performance, in order to verify the compliance with the guidelines and methodologies established for this purpose, said assessment must comply with the parameters of: objective, scope, definition of population and sample, verification instrument, report of results and corrective action plans to close gaps or improvement opportunities identified (if applicable). 

However, Ecopetrol may carry out audits, inspections, reviews, or other types of visits to measure and verify the compliance with guidelines and methodologies of the performance process of suppliers. 

SUPPLIER CORRECTIVE ACTION PLAN

In accordance with the results of Supplier´s Performance Assessments, Ecopetrol and the supplier may agree to generate an improvement plan that allows managing and closing the gaps identified during the contract execution. The development of the improvement plan must consider the level of deviation in the qualification of the evaluated criteria and the contract execution term. For its application the suppliers must prepare a proposal of the foreseen improvement plan, and it must be approved by Ecopetrol before beginning its implementation. 
Corrective action plans are only applied to significant suppliers identified through the supplier segmentation which is carried out by Ecopetrol on an annual basis.

With the approval of the improvement plan, the supplier agrees to fully adopt and comply with the agreed actions, and Ecopetrol´ s contract monitoring official must review and ensure the quality of the deliverables and the timely closure of the settled activities.

TRACKING AND MONITORING: 

• The Ecopetrol contract monitoring official must review and ensure the quality of the deliverables and the timely closure of the settled activities. If it is identified that the actions agreed have not been implemented, the improvement plan must be suspended and invalidated. The officer must inform this situation to the supply category leader, the auditor, the technical and functional area (labor, environmental, commercial, HSE, among others) for the respective analysis and decision-making.
• The Supplier Performance Leader will monitor the coverage and effectiveness of the corrective action plans implemented to significant suppliers guarantee their assessment and development.

COVERAGE: 

In 2023, 12 significant suppliers required the development and implementation of improvement plans due to the results of their performance assessments. Therefore, Ecopetrol, in mutual agreement with these suppliers, approved the generation of the respective plans, covering 100% of the suppliers which required corrective action plans to close the identified gaps.

CORRECTIVE ACTION PLAN IMPLEMENTATION SUPPORT: 

The contract monitoring official is the responsible for the follow up and monitoring of the execution of the actions defined in the plan, ensuring the implementation with quality and timeliness of the deliverables, with the support of the functional leaders, as applicable.